The RBNZ meets expectations and raises interest rates to 0.50%

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At their October monetary policy meeting, the board members of the Reserve Bank of New Zealand (RBNZ) decided increase the Official Cash Rate (OCR) from the historical low of 0.25% to 0.50%, as expected.

The RBNZ announces the first level of its takeoff since the pandemic began in March 2020.

Markets had priced in an 80% chance of a rate hike this week, given the optimistic stance from the August meeting.

RBNZ statement

The Committee noted that further removal of the monetary policy stimulus is expected over time.

The future movements depend on the medium-term outlook for inflation and employment.

It will be necessary to reduce the political stimulus to maintain price stability and maximum sustainable employment in the medium term.

Demand deficits are less of a problem than capacity constraints hitting the economy.

It is expected that several factors limit house prices in the medium term.

The Committee will be closely watching how the economy adjusts to the ongoing disruption caused by Covid-19.

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